CFA Level 1: Withdrawal Calculation

Withdrawal Calculation

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Question

If you have $5,000 in an account today and withdraw $2,000 in 3 years, how much can you withdraw from the account in 5 years, if the account earns interest at

8% per year, compounded annually?

Answers

Explanations

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A. B. C. D. E.

Explanation

The way to approach this problem is to find the PV today of the $2,000 amount, determine the difference between this amount and the original $5,000 amount, and then move this remaining amount to the 5 year point. On the BAII Plus, press 3 N, 8 I/Y, 2000 FV, 0 PMT, CPT PV. Then press + 5000 =. Then press PV, 5 N,

CPT FV to see the answer. On the HP12C, press 3 n, 8 i, 2000 FV, 0 PMT, CPT PV. Then press 5000 +. Then press PV, 5 n, FV to see the answer. Make sure the BAII Plus has the P/Y value set to 1.

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